On February 6, 2026, the California Labor and Workforce Development Agency (LWDA) published a Notice of Proposed Rulemaking to adopt the first-ever set of formal regulations governing PAGA’s administrative procedures. That sentence alone should get the attention of every California employer.

Since PAGA was enacted in 2004, and even after the landmark 2024 reforms, there have been no regulations clarifying how the law’s administrative processes actually work—from the initial notice requirements, to the cure procedures, to settlement oversight. The proposed regulations would change that in significant ways, adding 34 new sections to Title 8 of the California Code of Regulations. The written comment period closes on March 23, 2026, and these rules could reshape how PAGA cases are initiated, defended, and resolved.

This Friday’s Five breaks down the five most important things employers need to know about these proposed regulations and what they mean for your business.

1. Under the Proposal PAGA Notices Must Include Specific Facts — Boilerplate Won’t Cut It Anymore

For years, a common frustration for employers receiving PAGA notices has been the vague, cookie-cutter quality of the allegations. A notice might list a dozen Labor Code sections and recite the statutory language, but tell you almost nothing about what the employee actually experienced or why they believe a violation occurred. That made it nearly impossible for employers to evaluate the claims, respond meaningfully, or take corrective action.

The proposed regulations take direct aim at this problem. Under proposed Section 17420, all PAGA notices will need to be filed using a standardized form prescribed by the LWDA. More importantly, the notice must include a “short and plain statement of the facts and theories supporting each violation alleged and personally suffered by the claimant.” The regulations make clear that “[c]onclusory statements, generalized or vague allegations of violations without supporting facts particular to the claimant’s circumstances or working conditions, or statements summarizing or restating the law or legal requirements are not sufficient.”

That is a significant change in practice, even if courts have technically required specificity for years. Standardizing the form and explicitly spelling out what does not qualify gives employers a much stronger basis to challenge inadequate notices.

But the real teeth are in proposed Section 17420(f): no violation or theory of violation may be alleged in any PAGA lawsuit, or released in any settlement, unless it was included in a compliant PAGA notice or amended notice and the procedural requirements were satisfied. This is a powerful new defense tool. If the notice did not adequately allege it, a plaintiff cannot litigate it or settle it. Employers and their counsel should pay close attention to this provision, because it creates a direct link between the quality of the notice and the scope of any subsequent litigation.

2. The LWDA Is Going After PAGA Mill Firms with “High-Frequency Filer” and “Vexatious Filer” Designations

The LWDA is not being subtle about the problem it is trying to solve. In its Initial Statement of Reasons accompanying the proposed regulations, the agency laid out the data: during fiscal year 2024–2025, a total of 8,846 PAGA notices were filed. Five law firms alone accounted for 2,086 of those filings—nearly a quarter of all notices. Three firms filed more than one PAGA notice per day on average, with one firm filing 605 notices and a single attorney filing 597 in a single year.

The LWDA described these high-volume filers as typically using template notices that “repeat the same or similar allegations in a conclusory, boilerplate, or frivolous manner,” and stated that in many cases these attorneys “do not report filing PAGA lawsuits, thus demonstrating an apparent strategy of using PAGA notices as a bargaining chip in seeking quick individual settlements and attorneys’ fees recoveries without representing or seeking to protect the interests of the state or other aggrieved employees.”

In response, proposed Section 17415 creates a two-tier system. First, any attorney or law firm that files 200 or more PAGA notices in a 12-month period is designated a “high-frequency filer.” These filers must include a cover letter disclosing that status and a signed certification from the claimant confirming the claimant reviewed the notice, believes the allegations accurately describe violations they personally suffered, and the notice is not filed for an improper purpose like harassment.

Second, and more consequentially, the LWDA can designate an attorney or person as a “vexatious filer” after providing notice and an opportunity to be heard. A vexatious filer designation applies when someone has repeatedly filed PAGA notices that fail to meet legal requirements—including notices with inadequate facts and theories, frivolous allegations, or notices that appear intended to harass. Once designated, the attorney or firm is subject to a prefiling screening order, meaning their PAGA notices will not be accepted for filing until the LWDA reviews them for compliance. The LWDA will maintain a public list of both high-frequency and vexatious filers.

For employers, this is a welcome development. While it will not eliminate PAGA litigation, it signals a meaningful effort by the LWDA to curb the most abusive filing practices that have driven up costs for employers—particularly small businesses in the restaurant and hospitality industries that are frequent targets of these mass filings.

3. The Small Employer Cure Process Has Detailed Procedures — And a 33-Day Clock

The 2024 PAGA reforms created a new pre-litigation cure process for employers with fewer than 100 employees, allowing them to propose corrective measures to the LWDA before a lawsuit can be filed. The proposed regulations now provide the detailed procedural framework for how this will actually work in practice.

Under proposed Sections 17430 through 17439, the process works as follows. Once an employer receives a PAGA notice, it has 33 days to submit a confidential cure proposal to the LWDA. That proposal must identify the violations the employer proposes to cure and describe the specific actions it will take to correct them. The LWDA then has 14 days to review the proposal and decide whether to schedule a conference. If the proposal is facially sufficient or if a conference would help determine whether a cure is possible, the LWDA will schedule a cure conference—which may be conducted in person, by video, or by phone.

Before the conference, both parties must file pre-conference statements. The employer describes its proposed cure measures in detail, and the claimant states their position on whether those measures are sufficient. At the conference, an LWDA attorney works with both sides to determine what measures are necessary to cure the violations. If a cure plan is reached, the employer has up to 45 days to complete the corrective actions and must submit a sworn statement to the LWDA confirming completion.

There are several important details employers should note. Cure proposals are treated as confidential settlement communications under Evidence Code Section 1152, so they cannot be used as admissions of liability. However, an employer cannot use the cure process for the same Labor Code violation more than once within a 12-month period, regardless of worksite location. The employee cannot file a lawsuit while the cure process is pending. And if the LWDA determines the cure is complete but the claimant disagrees, the claimant can request a formal hearing before the Labor Commissioner’s Office—but must do so within just 10 days.

The takeaway for small employers is straightforward: the cure process offers a genuine opportunity to resolve PAGA claims before litigation, but only if you act quickly. The 33-day clock starts running the moment you receive a PAGA notice. Employers should have a plan in place now for how they will respond, including having counsel ready to evaluate whether the cure process is the right path for a given case.

4. PAGA Settlement Oversight Would Be Getting Much Stricter

One of the key goals of the 2024 PAGA reforms was to increase the LWDA’s oversight of PAGA litigation, particularly when it comes to settlements. The proposed regulations significantly expand what parties must do when settling a PAGA case.

Under proposed Section 17461, a proposed PAGA settlement submitted to the LWDA must now include far more than just the settlement agreement itself. Parties must submit the fully executed settlement agreement, all court filings supporting the settlement (including motions and declarations), and proof that they notified every other person with a pending PAGA action against the same employer. That notification must include a bold-text warning that the proposed settlement “may impact or foreclose your ability to pursue claims against the same defendant(s).”

The LWDA must be given at least 45 days to review any proposed settlement, and the parties are prohibited from voluntarily consenting to a court hearing that gives the LWDA less time than that. Other claimants with pending PAGA actions can submit comments for or against the settlement within 21 days. These provisions are designed to prevent the low-value, quick-turnaround settlements that some practitioners have used to resolve PAGA claims without meaningfully addressing the underlying violations.

Perhaps most significantly, proposed Section 17462 prohibits any pre-litigation settlement from releasing PAGA claims. Specifically, if an employee has filed a PAGA notice but has not yet filed a lawsuit, any private settlement between the employee and employer during that window cannot release the employer from PAGA claims belonging to the state or other employees. This directly targets the practice of plaintiff attorneys using PAGA notices as leverage to extract quick individual settlements without ever filing suit or protecting the interests of other workers.

For employers, this means the days of quietly resolving a PAGA notice with a check and a release before litigation may be over. Any resolution of PAGA claims will need to go through formal litigation and court-supervised settlement processes, with the LWDA looking over the parties’ shoulders.

5. Employers Would Have a Formal Response Process

Under proposed Section 17421, employers have a formal mechanism to respond to a PAGA notice within 33 days of receipt. The response is optional—the regulations make clear an employer “may, but is not required to, file a response.” But given everything else in these proposed regulations, employers should seriously consider using it.

An employer response can identify which violations the employer disputes and describe the factual and legal bases for those disputes, supported by evidence. The response need not address every violation alleged—it can be targeted to the claims the employer disputes most. This response is filed with the LWDA during the same 65-day window the agency uses to decide whether to investigate the case.

Think about what that means strategically. If a PAGA notice is deficient under the new specificity requirements—if it contains the kind of boilerplate, conclusory allegations the LWDA itself has criticized—an employer response is the employer’s first opportunity to put those deficiencies on the LWDA’s radar. A well-crafted response could influence the LWDA’s decision to investigate, shape the scope of any cure proceedings, or lay the groundwork for future litigation defenses.

This is especially important when paired with the new rule that violations can only be litigated or settled if they were adequately alleged in a compliant PAGA notice. An early, documented employer response identifying notice deficiencies could pay dividends down the road.

What Employers Should Do Now

These regulations are still in the proposal stage—the comment period runs through March 23, 2026, and the final rules could look different depending on what feedback the LWDA receives. But the direction is clear: the LWDA is moving to standardize procedures, raise the bar for PAGA notices, crack down on abusive filing practices, and increase settlement oversight.

Employers should take the following steps now:

  • Review the proposed regulations and consider submitting comments to the LWDA by March 23, 2026, particularly if you have experienced issues with boilerplate or frivolous PAGA notices.
  • Ensure your compliance infrastructure is in place. The cure process rewards employers who can act quickly. If you receive a PAGA notice, you need to be able to evaluate the claims, assess your compliance posture, and decide whether to pursue a cure proposal—all within 33 days. As we have written about before, employers need to be using technology to understand their time record data – it provides many benefits.
  • Talk to your employment counsel about a PAGA response strategy. With the new formal response mechanism and heightened notice specificity requirements, there are real opportunities to challenge deficient PAGA notices early in the process.
  • Conduct proactive compliance audits. The 2024 PAGA reforms allow employers who can demonstrate “all reasonable steps” to cap penalties at 15%. These proposed regulations add another layer: a structured cure process that only benefits employers prepared to use it. The best time to prepare is before a PAGA notice arrives, and we have been working with many of our clients to be able to prove these reasonable steps.

Last August at the Prosper Forum at the Ritz-Carlton, Amelia Island, we recorded a live conversation on a simple premise: leadership isn’t a title. It’s a decision you make every day.

I moderated a panel with leaders who build teams, carry accountability, and operate in environments where execution matters:

John Tallichet, CEO of Specialty Restaurants
Reggie Stover, Chief People Officer of Henny Penny
Josh Halpern, CEO of Big Chicken / Craveworthy Brands
Luke Kircher, President of Prosper Company
Michael Beck, CEO of Inc Tank GTM

Here are the five most useful takeaways, in their words and in practical terms.

1. Leadership is responsibility, not authority.

A recurring theme was that leadership shows up the moment people rely on you, not when you get the title. Reggie tied it to early life and the burden of being responsible for others. Josh framed it as being “worthy of follow,” pointing out that everyone has had “bosses” who weren’t leaders. Luke made it clear leadership isn’t a finish line; it’s an ongoing expansion of capability and responsibility.

Practical takeaway: If you’re evaluating leaders, don’t ask “How senior are they?” Ask “Do people naturally look to them when it gets hard?” That’s the job.

2. The best leaders don’t decide in a vacuum—but they do decide.

Two points held together beautifully: Josh emphasized gathering input from the people “in the trenches,” and then owning the final call. Reggie reinforced a hard-earned lesson from military training: the most dangerous failure isn’t a wrong decision; it’s indecision. John echoed the importance of decision-making under pressure in high-volume operations.

Practical takeaway: Build a culture where (1) decisions are informed by the people closest to the work, and (2) someone is accountable for making the call. “Consensus” can’t become a hiding place.

3. Selecting future leaders is an ethos test: team-first, coachable, accountable.

Reggie looks for people who raise their hand, bring energy, ask questions, and show courage. Josh described his “secret sauce” as selecting for people who care about legacy, put the team above themselves, celebrate wins loudly, and take accountability without excuses. John highlighted the disqualifier: “heroes” who want it to be about them. He also stressed coachability—especially the ability to take feedback without making it personal.

Practical takeaway: Performance isn’t enough. Your leadership pipeline should screen for ethos: team orientation, accountability, and coachability under pressure.

4. Development happens through ownership, exposure, and real stretch.

The panel converged on a critical idea: you can’t train leaders only with coursework. You train them by giving them ownership and letting them stretch into ambiguity.

Josh shared a defining lesson from early in his career: when he asked his boss to choose between two agencies, the response was, “If I have to do for you, I don’t need you.” The point wasn’t cruelty; it was ownership. Reggie described the intentional HR track (onboarding → goal setting → performance reviews → talent assessment → succession planning → development plans, including tools like 9-box when done correctly). Luke added a key caution: growth requires self-reflection about timing and sacrifice. Some people can lead, but “not right now,” and forcing that path can create burnout and personal cost.

Practical takeaway: Promote with a plan. Then “stretch” with support. Ownership without coaching is abandonment; coaching without ownership is stagnation.

5. The real differentiator is communication and vulnerability.

Reggie called communication the most critical leadership skill—whether on the battlefield, the basketball court, or in the boardroom. Josh added the trait that too many leadership conversations skip: vulnerability. The willingness to say, “I am the problem,” not as self-flagellation, but as ownership—and therefore the ability to fix it with the team.

John’s closing story tied it together: a leader made an early major mistake after rejoining the company, learned from it (by listening to the local team), and became a top-three leader. The through-line: leaders need grace to recover, but they must learn, communicate, and adjust.

Practical takeaway: If you want durable leadership cultures, normalize two things: direct communication and productive vulnerability. That’s how teams execute consistently at scale.

Watch the full panel on YouTube

If you’re a founder, executive, HR leader, or operator responsible for people and performance, this conversation will give you practical perspective from leaders in the arena—on hiring, accountability, culture design, succession, and building teams that execute.

You can watch the full video on YouTube here (and if you’re sharing it internally, it’s an excellent “leadership bench” discussion starter for your next ops meeting).

Across the country, state legislatures are moving quickly to regulate artificial intelligence in the workplace. California’s proposed SB 947 – the Automated Decision Systems in the Workplace – introduced in the California Legislature on February 2, 2026, is one prominent example, but it is part of a broader trend: laws that seek to govern how employers may adopt, deploy, and rely on AI-driven tools when making employment-related decisions.

Other proposed AI-related legislation underscores how rapidly this movement is accelerating. For example, SB 951—the California Worker Technological Displacement Act—would require employers to provide at least 90 days’ advance notice before layoffs caused by “technological displacement.” In addition, the California Labor Federation has publicly stated that it will sponsor or support more than two dozen bills this year focused on the impact of artificial intelligence on workers in California.

While these bills are typically framed as worker-protection measures, they reflect a deeper and unresolved policy tension—whether AI in the workplace should be regulated piecemeal at the state level, or whether regulation must occur at the federal level to avoid a patchwork of rules that materially hinder innovation, adoption, and economic growth.

Using SB 947 as a case study, it becomes clear that many of these proposals proceed from the same assumptions and raise the same structural problems.

At a high level, bills like SB 947 seek to regulate employers’ use of “automated decision systems” (ADS)—a term defined so broadly that it can encompass AI-driven tools, analytics software, scoring systems, and other technology used to assist with employment decisions. The scope of regulated activity typically extends well beyond hiring and firing to include scheduling, compensation, performance evaluation, work assignments, and discipline.

Under SB 947, for example, employers would be prohibited from relying solely on an automated system for disciplinary or termination decisions and would be required to conduct a human “independent investigation” to corroborate any AI-generated output. Similar proposals impose restrictions on the types of data that may be used, prohibit “predictive behavior analysis,” and bar the use of systems that could infer protected characteristics.

These bills also commonly create new notice and disclosure obligations. If an AI-assisted tool is used in connection with discipline or termination, employers may be required to provide written post-use notices, identify vendors, explain human review processes, and produce data inputs, outputs, corroborating materials, and impact assessments upon request.

Enforcement mechanisms tend to be expansive. Using SB 947 again as an example, compliance would be enforced not only by labor agencies and public prosecutors, but also through private civil actions with attorneys’ fees and punitive damages available. The result is not simply technology regulation, but a new, litigation-driven compliance regime layered on top of already complex employment laws.

Layered onto this regulatory push is a more fundamental uncertainty: we still do not know what AI will do to jobs. Yet many of these bills proceed as if the answers are already settled.

Below are five reasons why state-level efforts to regulate employer adoption of AI—illustrated by SB 947—are misaligned with where the AI policy conversation is actually heading.

1. State-Level AI Regulation Ignores the Growing Federal Consensus on the Need for Uniform Standards

At the federal level, there is increasing bipartisan agreement on one point: a state-by-state approach to AI regulation is incompatible with innovation, compliance, and economic growth. Although Congress has not yet enacted comprehensive AI legislation, federal policymakers have repeatedly emphasized the need for a national framework, particularly for technologies deployed at scale.

AI systems do not respect state borders. Employers operating across multiple jurisdictions cannot realistically deploy one version of a scheduling, hiring, or performance tool for California, another for Colorado, another for Illinois, and another for New York. The compliance burden discourages adoption, especially for mid-sized employers without dedicated AI governance teams.

Bills like SB 947 move states in the opposite direction by layering unique definitions, procedural requirements, and disclosure obligations on top of existing employment law—contributing directly to the fragmentation federal policymakers are attempting to avoid.

2. A Patchwork of State Laws Does Not Protect Workers—It Discourages Responsible AI Adoption

One of the ironies of these proposals is that they may reduce fairness rather than enhance it. When employers are discouraged from using standardized, data-driven tools due to legal risk, decision-making does not disappear—it becomes more subjective.

AI tools, when designed and implemented responsibly, can help standardize employment decisions, improve documentation, flag compliance risks, and reduce arbitrary outcomes in a regulatory environment as complex as California’s. A framework that treats AI as presumptively suspect, while leaving human discretion largely unregulated, misunderstands where workplace risk actually arises.

Advocates for federal preemption are not arguing for deregulation. Nor are they suggesting that existing discrimination, wage and hour, or harassment laws should cease to apply. Rather, they are calling for uniform standards that encourage transparency and responsible adoption instead of regulatory avoidance.

3. These Bills Assume AI’s Impact on Jobs Is Known—It Is Not

State-level AI regulation efforts frequently assume that AI is primarily a job-elimination tool that must be constrained to protect workers. That assumption is premature.

While some routine and repetitive tasks will undoubtedly be automated, history shows that productivity-enhancing technologies often create new categories of work, increase demand in unexpected areas, and expand employment over time.

This dynamic is captured by Jevons’ Paradox: as efficiency improves and costs decrease, demand often increases rather than contracts. Applied to AI, tools that make management, scheduling, analysis, or compliance more efficient may expand operations and create new roles that did not previously exist.

We do not yet know which jobs will shrink, which will evolve, and which will expand. Laws that lock in assumptions too early risk distorting outcomes rather than protecting the workers who are actually impacted.

4. Overregulation Risks Driving AI Use Underground Rather Than Making It Transparent

Another unintended consequence of these proposals is that they incentivize informal or opaque AI use. If deploying AI tools triggers extensive notice obligations, disclosure rights, and litigation exposure, employers may still rely on AI—but in less visible and less documented ways.

That outcome is worse for workers. Transparency and accountability arise from clear, workable rules that encourage open use, not from regimes that make employers defensive. This is particularly problematic given that AI is already embedded in most modern software platforms—from email systems and document tools to scheduling, communications, and analytics.

A federal framework could establish baseline protections while allowing best practices to evolve. State-level mandates risk freezing rules before those practices are even developed.

5. States Risk Becoming Outliers as Federal AI Standards Are Likely to Emerge

Even if bills like SB 947 are enacted, they are unlikely to be the final word. Federal AI legislation—particularly legislation that expressly preempts conflicting state laws—remains a realistic possibility.

If and when federal standards emerge, employers may find themselves having invested heavily in state-specific compliance regimes that are later overridden or rendered obsolete. From a policy perspective, this is inefficient. From a business perspective, it is destabilizing and may influence decisions about where to invest and expand.

The Bottom Line

SB 947 is best understood as an example of a broader legislative trend: state efforts to regulate AI in the workplace before its impacts are fully understood. These proposals often assume harm before evidence, substitute procedural mandates for substantive outcomes, and overlook the growing federal consensus in favor of uniform standards.

AI will change work—there is no question about that. But how, how fast, and for whom remains an open question. A national framework focused on outcomes rather than fear is far more likely to protect workers and encourage responsible innovation than a growing patchwork of state experiments.

What Employers Should Be Doing Now

Regardless of how AI regulation ultimately develops, AI is already in the workplace—often before employers realize it. The real risk for California employers is not AI itself, but using it without clear policies, training, and legal guardrails.

To help employers navigate this evolving landscape, we are hosting a one-hour masterclass focused on the practical, real-world use of AI in the California workplace.

Masterclass: AI in the California Workplace — Practical Tools, Real Use Cases, and Legal Guardrails

We will cover how employers are actually using AI today—from hiring and scheduling to performance management and documentation—along with the key legal and compliance issues to understand, including wage-and-hour exposure, discrimination risk, privacy concerns, and PAGA implications. Attendees will leave with practical guidance on how to use AI responsibly and reduce risk.

Wednesday, February 25, 2026 | 10:00 a.m. PT – Register here.

As California employers enter 2026, employment law compliance is no longer just about having policies in place—it is about being able to prove that the company took documented, reasonable steps to comply with the Labor Code before problems arose. Despite the 2024 PAGA reforms, PAGA filings continued to rise through 2025, and courts are now scrutinizing whether employers can demonstrate proactive compliance efforts to cap penalties and reduce exposure.

A comprehensive employment law audit is one of the most effective ways to meet that standard. When done correctly, an audit helps ensure policies reflect current law, managers are trained on day-to-day compliance obligations, required records are properly maintained, and new statutory requirements—such as updated notice and wage thresholds—are implemented on time. Just as importantly, a well-documented audit creates the evidentiary record employers now need to defend PAGA claims and take advantage of penalty caps under the reformed statute.

Below are five key areas California employers should be reviewing in 2026, along with practical questions designed to identify gaps, prioritize corrective action, and strengthen compliance systems before enforcement or litigation occurs.

1. Hiring Practices

 2. Records

  • New for 2026: Beginning February 1, 2026, employers must distribute the official “California Workplace – Know Your Rights” notice to all current employees, using a delivery method that reasonably ensures receipt within one business day.
  • Are employee files maintained confidentially and for at least four years?
  • Are employee time records maintained for at least four years?
  • Are employee schedules maintained for at least four years?
  • Do the managers have set forms for the following:
    • Employee discipline and write-ups
    • Documenting employee tardiness
  • How is the employee documentation provided to Human Resources or the appropriate manager?
  • Who is involved in reviewing disability accommodation requests?
  • How are employee absences documented?

3. Ensuring PAGA Compliance Through Reasonable Efforts and Addressing Wage and Hour Practices

  • Does employer conduct routine PAGA audit to show reasonable efforts to comply with the Labor Code at cap penalties, including:
  • Conduct periodic payroll audits
  • Establish compliant policies and handbook policies
  • Train supervisors on Labor Code compliance
  • Take appropriate corrective action with supervisors who violate company policy

Read more about the reasonable steps employers should be taking in 2026 to cap PAGA penalties in our prior article here.

  • Does the company have its workweeks and paydays established?
  • Are paydays within the applicable time limits after the pay period as required under the law?
  • Are employees provided with compliant itemized wage statements?
  • Are employees provided with a writing setting out their accrued paid sick leave each pay period? Has the amount of accrued paid sick leave reported to employees been updated to comply with California’s increased requirements in 2024?
  • Are employees properly classified as exempt or nonexempt?
    • For exempt employees, review their duties and salary to ensure they meet the legal requirements to be an exempt employee.
  • Are any workers classified as independent contractors, and if so, could they be considered employees under AB 5?
  • Are nonexempt employees properly compensated for all overtime worked?
  • Is off-the-clock work prohibited?
    • Policy in place?
    • Are managers trained how to recognize off-the-clock work and what disciplinary actions to take if finding employees working off-the-clock?
  • Does the company’s time keeping system round employee’s time?
    • If so, is the rounding policy compliant with the law? Employers should note that meal breaks cannot be rounded pursuant to Donohue v. AMN Services, and whether California employers may use time rounding at all is currently being reviewed by the California Supreme Court. Employers are cautioned about using time rounding given these cases.
  • Are meal and rest period policies set out in handbook and employees routinely reminded of policies?
    • (See additional PAGA audit items above)
    • Does the company pay “premium pay” for missed meal and rest breaks? If so, how is this documented on the employee pay stub? Does the company have a clear definition of what is considered a missed break and document why the employee missed the break?
    • Do employees record meal breaks?
    • Are managers trained on how to administer breaks and what actions to take if employees miss meal or rest breaks?
    • Are employees provided attestations to document the reason if the employee missed, took a short, or a late meal break? (See Donohue v. AMN Services)
  • If employer provides vacation, is the policy properly documented, tracked, and is unused vacation paid out with the employee’s final paycheck?
  • Are all deductions from the employee’s paycheck legally permitted?
  • Are employees reimbursed for all business expenses, such as uniforms, work equipment, mileage for work, and for expenses incurred for working from home (such as internet, cell phones, etc.)?

 4. End of Employment Issues

  • Are employees leaving the company provided their final wages, including payment for all accrued and unused vacation time?
  • Are final paychecks provided to employees within the required deadlines?
  • Does the employer deduct any items from an employee’s final paycheck?
    • If so, are the deductions legally permitted? (Use caution, very few deductions are permitted under California law.)

5. Anti-harassment, discrimination and retaliation

  • Are supervisors provided with sexual harassment training every two years? (If employer has 5 or more employees, supervisors are legally required to have a two-hour harassment prevention training that complies with California law.)
  • Are there steps in place to provide nonsupervisory employees with 1-hour sexual harassment prevention training and once every 2 years thereafter? (Required for employers with 5 or more employees.)
  • Are supervisors and managers discussing the company’s open-door policy to employees at routine meetings with employees? Is this being documented?

What “Reasonable Steps” Really Mean in 2026: How California Employers Reduce PAGA and Employment Litigation Exposure

As California employers move through 2026, one thing is clear: employment litigation—and PAGA litigation in particular—is not slowing down.

Despite the highly publicized 2024 PAGA reforms, 2025 became the largest year yet for PAGA LWDA filings. That reality has reset expectations. The reform did not reduce enforcement—it changed how employers must defend these cases.

The new dividing line is no longer simply whether a violation occurred.
It is whether the employer can prove it took all reasonable steps to comply.

While no employer can completely prevent lawsuits, California employers can significantly reduce exposure by focusing on what they can control. The following five steps focus on what can actually work in 2026 for employers that want to reduce risk, cap penalties, and maintain leverage when disputes arise.

1. Prove “Reasonable Steps” Before a PAGA Notice Is Filed

The reformed PAGA statute gives employers something they never truly had before: meaningful penalty reduction tied directly to compliance efforts.

• Employers that can prove they took reasonable steps before receiving a PAGA notice may cap penalties at 15%.
• Employers that attempt to fix issues after receiving notice face substantially higher exposure.

In practice, “reasonable steps” now require more than intent or informal reviews. Employers must be able to demonstrate a repeatable, documented compliance system.

This includes:

  • Regular wage-and-hour audits addressing meal and rest break compliance, timekeeping practices, and pay calculations
  • Written policies and handbooks that reflect current California law
  • Supervisor training with attendance records and materials preserved
  • Documented corrective action when issues are identified
  • Follow-up audits confirming that fixes were implemented

By 2026, periodic audits by experienced California employment counsel are no longer a best practice—they are increasingly the baseline for employers seeking to limit PAGA penalties.

2. Document Termination Decisions Accurately and Consistently

Termination decisions remain one of the most common triggers for employment litigation. While California law does not require a termination letter in most cases, providing one that accurately states the reason for separation is often a prudent step.

What matters most is consistency.

Plaintiff’s attorneys routinely compare termination reasons against:

  • Performance reviews
  • Internal emails and messaging platforms
  • EDD filings
  • Deposition testimony

Employers should avoid “softening” termination reasons or mischaracterizing a discharge as a layoff when performance or misconduct is the true basis. When an employer later attempts to explain that the real reason was different, it can appear as though the company is changing its story—damaging credibility at the outset of litigation.

If a termination is for cause, the documentation should say so clearly and accurately with concrete examples.

Common examples include:

  • Documented performance deficiencies
  • Policy violations
  • Insubordination
  • Dishonesty or theft
  • Harassment or discrimination
  • Excessive absenteeism or tardiness
  • Misuse of company resources

Clear, contemporaneous documentation often becomes one of the most important exhibits in early settlement discussions.

3. Use Employment Counsel as a Preventive Compliance Partner

California employment law is highly technical and unforgiving. Employers that treat employment counsel as emergency responders rather than strategic partners often incur greater legal expense over time.

In 2026, sophisticated employers integrate employment counsel into ongoing operations, including:

  • Policy and handbook updates
  • High-risk discipline and termination decisions
  • Wage-and-hour audits
  • Supervisor training
  • PAGA preparedness planning

This approach allows employers to identify and address issues early—before they become expensive class or representative actions—and often reduces total legal spend by avoiding defensive litigation altogether.

4. Invest in Knowledgeable, Empowered HR Leadership

A capable HR professional does more than administer paperwork. In 2026, HR is a critical risk-management function.

Experienced HR professionals:

  • Provide employees with a clear reporting channel for concerns
  • Conduct timely, well-documented investigations
  • Track complaints, resolutions, and corrective actions
  • Serve as a first line of defense against escalating disputes

No organization is immune from employee complaints. The question is whether issues are addressed promptly and professionally—or allowed to fester into litigation.

5. Ensure Ownership-Level Engagement and Accessibility

The most effective step for reducing employment litigation still comes from the top.

In practice, the amount of litigation an organization faces is often inversely proportional to how engaged ownership or executive leadership is with employees. Employers with strong litigation records frequently share common traits: leadership is visible, accessible, and willing to hear concerns.

When employees believe issues will be taken seriously and addressed internally, most disputes never reach a lawyer’s desk. When employees feel ignored or dismissed, litigation often becomes the mechanism they use to be heard.

In 2026, leadership engagement is not just cultural—it is strategic.

Final Thought

California employment litigation has entered a new phase. The question is no longer whether employers can achieve perfect compliance—it is whether they can prove responsible, proactive, and systematic efforts to comply.

For employers willing to invest in preparation, documentation, and leadership engagement, the reformed PAGA statute provides meaningful tools to reduce penalties and control risk. For those who do not, exposure remains as high as ever.

Preparation—not reaction—is what separates employers who manage risk from those who absorb it.

At Zaller Law Group, we do not talk about AI and technology in the abstract. We use it—every day—as a litigation tool to give our clients a measurable advantage.

California wage-and-hour and PAGA cases are data cases. Outcomes often turn on what the time records actually show, how quickly they can be analyzed, and whether counsel truly understands the data. That is why we helped design and deploy Scaled Comp, a software platform our lawyers advised on the software development to analyze large volumes of time and pay data early in a case.

Here are five ways this technology materially benefits our clients.

1. Early, Large-Scale Time Record Analysis Saves Time and Money

Wage-and-hour and PAGA cases routinely involve tens of thousands—or millions—of time entries. Traditionally, this data is not meaningfully analyzed until late in the case, often after months of motion practice, discovery disputes, and mounting legal fees.

Using Scaled Comp, we analyze large volumes of time record data early—often at the outset of litigation. This allows us to identify compliance issues (or confirm compliance) before unnecessary costs are incurred.

Early insight means fewer surprises, tighter strategy, and a more efficient defense from day one.

2. Employers Know Their Potential Exposure—and Their Best Arguments

Data clarity changes everything.

When time records are analyzed early:

  • Employers understand their realistic potential liability
  • Employers know where their strongest defense arguments exist
  • Strategy is built on facts, not assumptions

This is especially critical in mediation. Parties who understand their data negotiate from a position of strength. Parties who do not are negotiating blind.

Scaled Comp allows us to quantify issues, isolate anomalies, and explain—clearly and persuasively—the story the data actually tells.

3. Stronger “Reasonable Efforts” Arguments Under the Reformed PAGA Law

Under California’s 2024 PAGA reform, employers who can demonstrate reasonable efforts to comply may cap penalties at 15%.

Compliance rates matter. Patterns matter. Documentation matters.

By analyzing time records at scale, we can:

  • Measure compliance rates across locations and time periods
  • Identify where corrective actions were taken
  • Support reasonable efforts arguments with real data, not general statements

This is not theoretical. It is outcome-driven litigation strategy tied directly to reduced penalty exposure.

4. Lawyers Must Control—and Understand—the Data

Too often, law firms outsource data analysis to third-parties who run numbers in isolation and deliver a report weeks or months later. That approach creates three problems:

  1. Lawyers lose control of the data
  2. Lawyers do not fully understand the analysis
  3. Strategy becomes dependent on someone outside the litigation team

At Zaller Law Group, Scaled Comp provides both the report and the underlying data for our attorneys to use and fully understand. This allows our lawyers to dispute differences between data sets in real time—an enormous advantage during negotiations and mediation.

Because Scaled Comp is used in-house:

  • We control the data
  • We understand the assumptions
  • We can run real-time analysis during mediation or calls with a mediator

Your lawyer should be fluent in your records—not waiting on someone else to explain them.

5. Faster Insight Leads to Earlier Resolution—and Better Outcomes

Delays are expensive.

The longer it takes to analyze data, schedule mediation, and meaningfully evaluate exposure, the longer a case lingers, the longer the recovery period continues, and the higher the settlement risk becomes. Prolonged litigation increases legal spend, business disruption, and uncertainty.

By front-loading data analysis:

  • Cases are positioned for earlier mediation
  • Resolution happens earlier—not a year or more after filing
  • Employers reduce total litigation cost and recovery period

Clients are better served by efficient resolution—not prolonged process.

Final Thought: AI Is No Longer Optional

This is no longer a debate about whether AI and technology belong in legal practice.

They are here.

Law firms that are not using technology to analyze data at scale are already behind opposing counsel—and are not delivering the strongest possible defense to their clients. Lawyers need to wake up to that reality.

At Zaller Law Group, we use technology strategically, responsibly, and aggressively to protect employers operating in California’s most challenging legal environment.

That is not the future of employment defense.
It is the present.

To learn more about Scaled Comp and how it is used to analyze time and pay data in wage-and-hour and PAGA matters, feel free to contact me or visit www.scaledcomp.com.

The California Labor Commissioner published the official “California Workplace – Know Your Rights” notice (available here in English and Spanish) required under the Workplace Know Your Rights Act (SB 294).

The first mandatory distribution date is February 1, 2026.

Here are five things every California employer should understand now.

1. Distribution Rules Are Specific

Beginning February 1, 2026, employers must provide the notice:

  • To all current California employees by February 1, 2026;
  • To new hires at the time of hire; and
  • To union representatives, where applicable.

Delivery must be made using the employer’s normal communication method—including personal delivery, email, or text message—so long as receipt can reasonably be expected within one business day.

2. Recordkeeping Requirements: Keep Proof For Three Years

Employers must keep proof of notice delivery for at least three years. This proof can include:

  • Signed acknowledgment forms
  • Digital read receipts or confirmation emails
  • HR system logs

Strong documentation will be key if the Labor Commissioner or another enforcement agency requests verification.

For California HR teams, this is a good time to audit your employee recordkeeping process and ensure that all required workplace postings and notices are organized in one place.

3. New Educational Videos and Employer Resources

The Labor Commissioner’s Office will also release two educational videos by July 1, 2026:

  1. A video for employees explaining their workplace rights.
  2. A video for employers outlining compliance requirements and constitutional protections.

Employers should plan to include these videos in onboarding, annual training, or even all-hands compliance refreshers to demonstrate good-faith efforts at compliance.

For updates on when these materials become available, make sure you are subscribed to receive updates at California Employment Law Report.

4. Emergency Contact Obligations Are a Separate Compliance Deadline

SB 294 also imposes a new requirement effective March 30, 2026.

By that date, employers must allow employees to:

  • Designate or update an emergency contact; and
  • Indicate whether that contact should be notified if the employee is arrested or detained.

If an employee makes that request, the employer must notify the emergency contact when the employee is arrested or detained:

  • At the workplace; or
  • During work hours or job duties (even off-site), if the employer has actual knowledge.

This requirement will require updated forms, onboarding processes, and HR training.

5. Penalties Are Real—and Layered on Top of Other Exposure

Failure to comply with SB 294 can result in civil penalties of:

  • Up to $500 per employee per day for emergency contact violations; and
  • Up to $500 per employee per violation for notice-related failures.

Bottom Line for Employers

Now is the time for employers to:

  • Audit communication systems for reliable, trackable distribution;
  • Update onboarding documents (we generally recommend standard new hire packets);
  • Prepare emergency contact procedures ahead of March 30, 2026;
  • Train managers and HR teams on how these rights apply in practice; and
  • Calendar February 1, 2026 as a firm compliance deadline.

California continues to raise the bar on employer documentation and transparency. Employers who prepare early will be best positioned to demonstrate good-faith compliance—and reduce litigation risk—when enforcement begins.

As California employers enter 2026, one thing is clear: PAGA risk is not going away—and it is not plateauing.

The numbers tell the story. Despite the highly publicized 2024 PAGA reforms, 2025 became the largest year yet for PAGA filings. That reality should reset expectations for California employers. Reform did not reduce filings—it changed how employers must defend them.

The new dividing line is no longer simply whether a violation occurred.
It is whether the employer can prove it took “all reasonable steps” to comply.

The 2026 Reality: PAGA Reform Rewards Preparation, Not Intent

The reformed PAGA statute gives employers something they never truly had before: meaningful penalty reduction for demonstrated compliance efforts.

  • Employers that took reasonable steps before receiving a PAGA notice may cap penalties at 15%.
  • Employers that take reasonable steps within 60 days after receiving a notice may cap penalties at 30%.

But these caps are not automatic. Courts evaluate reasonableness under the totality of the circumstances, considering:

  • employer size and resources,
  • the nature, severity, and duration of the alleged violations, and
  • whether systems existed to prevent, detect, and correct issues.

Critically, the statute also recognizes that violations can occur even when reasonable steps are taken. That language matters—but only if employers can prove those steps with evidence.

“Reasonable Steps” Is Not a Checkbox—It’s an Evidence Standard

The statute makes clear that courts must evaluate reasonableness based on the totality of the circumstances, including:

  • the size and resources of the employer,
  • the nature, severity, and duration of the alleged violations, and
  • whether the employer made good-faith efforts to comply.

Importantly, the law also states that the mere existence of a violation does not mean the employer failed to take reasonable steps. That language is critical. It recognizes that even compliant employers can experience errors—and shifts the focus to whether the employer had systems in place to prevent, detect, and correct problems.

What “Reasonable Steps” Must Look Like in 2026

As we start 2026, employers should think of reasonable steps as an operating system, not a compliance memo. Below is what that system should include.

1. Conduct Periodic Payroll and Wage-Hour Audits—and Act on the Results

Audits alone are not enough. What matters is what the employer does after issues are identified.

Strong examples include:

  • Regular wage-hour audits focused on high-risk areas such as meal and rest periods, off-the-clock work, time rounding, regular rate calculations, premiums, and expense reimbursements.
  • Exception reporting that flags patterns (missed meals, late meal breaks, frequent time edits) before they become systemic.
  • A documented remediation process showing when issues were found, how they were corrected, and how recurrence was prevented.

From a PAGA perspective, an audit without documented corrective action is weak evidence. An audit paired with a remediation trail is powerful.

2. Maintain Lawful, Up-to-Date Written Policies—and Actually Use Them

Written policies matter, but only if they are current, distributed, and aligned with how the business operates.

Reasonable steps include:

  • Wage-hour policies that clearly address timekeeping, meal and rest periods, premium pay, time edits, off-the-clock prohibitions, and reimbursements.
  • Version control showing when policies were updated and why.
  • Proof of dissemination—signed acknowledgments or digital confirmations.
  • Integration of policies into onboarding and manager guidance, not just an employee handbook that sits on a shelf.

Courts and agencies look skeptically at policies that exist on paper but are ignored in practice.

3. Train Supervisors on Wage-Hour Compliance

Many PAGA claims are driven by front-line management behavior, not by payroll or back office managers. Training supervisors is a core component of the reasonable-steps analysis.

Effective training includes:

  • Role-specific instruction for managers who schedule employees, approve time, or make payroll adjustments.
  • Training on meal and rest period timing, time edits, off-the-clock risks, and premium pay.
  • Documentation of attendance, materials used, and follow-up training when issues arise.

Training that is documented and refreshed over time carries significantly more weight than a one-time presentation years earlier.

4. Take Corrective Action When Supervisors Cause Violations

Reasonable steps also require accountability.

When audits, complaints, or data show that supervisors are contributing to violations, employers should be able to show:

  • Coaching and retraining efforts,
  • Escalating discipline where appropriate,
  • Removal or limitation of time-edit authority for repeat offenders, and
  • Compliance metrics built into management performance expectations.

This is often decisive in countering claims that violations are “systemic” or “intentional.”

5. Respond Strategically Within 60 Days of a PAGA Notice

For employers who did not already have these systems in place, the reform still provides an opportunity. Employers who take reasonable steps within 60 days after receiving a PAGA notice may still qualify for a reduced penalty cap.

A disciplined 60-day response typically includes:

  • Immediate preservation and review of records tied to the alleged violations,
  • A focused audit of affected locations, job classifications, and time periods,
  • Prompt correction of payroll or scheduling practices,
  • Targeted policy updates and supervisor retraining, and
  • A clean documentation package showing what changed and when.

This window is short—and preparation before a notice is received dramatically improves outcomes.

The Takeaway for California Employers

The 2024 PAGA reforms reward employers who invest in process, documentation, and accountability. The question is no longer simply whether a violation occurred. It is whether the employer can show it acted reasonably before and after issues arose.

Employers who build their compliance systems now will be in a far stronger position when—not if—a PAGA notice arrives.

At Zaller Law Group, we help California employers build and document PAGA-ready compliance systems designed to meet the “reasonable steps” standard. If you want to reduce PAGA exposure and take advantage of the new penalty caps, now is the time to act.

Happy Holidays! As we close out 2025, I’m reflecting on an incredible year at Zaller Law Group. This year brought both challenges and opportunities for California employers—from navigating new 2026 legislation to managing the ongoing wave of PAGA litigation, to embracing AI tools that are transforming how businesses operate.

Despite the complexity of California’s regulatory environment, our team at ZLG remained committed to one mission: educating, convening, and supporting California employers through every twist and turn. Here’s a look back at how we showed up for you in 2025:

1. 14 Masterclasses with Over 3,000 Participants

In 2025, we expanded our educational programming significantly. These sessions covered everything from PAGA reform strategies to AI compliance in hiring, giving employers actionable insights they could implement immediately. As a State Bar of California-approved multi-activity provider, many of our masterclasses were eligible for MCLE credit for attending attorneys. We also offered SHRM credit for HR professionals in attendance. If you would like to receive notice of our upcoming Masterclasses in 2026 – subscribe to our newsletter below.

2. Four Invitation-Only Employers Summit Events with 100+ Attendees

We hosted four exclusive, in-person events throughout the year at premier venues (and client locations) including Gran Blanco, TopGolf, American Beauty, and Castaway. These summits brought together over 100 California employers, CEOs, HR leaders, and in-house counsel for live education, networking, and candid discussions about the challenges facing California businesses today. The feedback was overwhelmingly positive, and we’re already planning our 2026 summit series.

3. Monthly Newsletter Reaching 9,000+ Subscribers

Our monthly newsletter continued to be a vital resource for staying current on California employment law updates, litigation trends, curated resources and videos, and details on upcoming events like our Employers Summit. With over 9,000 subscribers, this newsletter has become a trusted source for employers across industries who need reliable, timely information.

4. 52 Weekly Blog Posts Read by 8,000+ Subscribers

Since 2007, I’ve published weekly Friday posts offering practical guidance on California employment law developments, litigation trends, and compliance challenges employers face. This year, our blog reached 8,000+ readers who rely on these posts to stay ahead of regulatory changes and emerging legal issues. We are also proud to see many other defense attorneys subscribing to the blog—we are honored to be trusted by so many people to keep up-to-date with California employment law developments and thought leadership. Subscribe to the blog here.

5. YouTube Channel: 3,000+ Subscribers, 88,000+ Views, 770,000+ Impressions

Our YouTube channel, “The Legal Lineup,” saw tremendous growth in 2025. We shared insights from masterclasses, live events, and interviews with industry leaders, reaching over 3,000 subscribers. The channel generated 88,000+ views and 770,000+ impressions, making it an increasingly valuable resource for California business leaders seeking accessible legal education. Subscribe to the channel here.

And one more for 2025: New Office Space!

We’re excited to share that we relocated to our own space at 721 N Douglas Street, El Segundo, CA 90245. This move reflects our continued growth and commitment to serving California employers from a dedicated, professional environment. When looking for an office, it was an easy decision to stay in El Segundo. We are honored to be a part of the amazing business ecosystem developing here in El Segundo.

The work described above reflects the dedication of our entire team at Zaller Law Group—attorneys, paralegals, and staff who work tirelessly not only to defend employers in litigation but also to proactively educate and empower them to avoid legal pitfalls in the first place.

Thank you to our clients, partners, and community for an impactful year. Wishing everyone a prosperous and compliant 2026—we’ll see you at our next summit!

If you’re not already subscribed to our blog or newsletter, now’s the perfect time: Subscribe here

For most California employers, employee time and pay data has historically been treated as a legal obligation—something you keep because the law requires it, not because it creates value.

That mindset needs to change in 2026.

After years of defending employers in wage-and-hour class actions and PAGA cases, I have seen firsthand how employee data can either become an employer’s greatest liability or its strongest asset. The difference is no longer about company size or resources—it is about whether employers are using modern tools, including AI, to unlock the value of the data they already have.

Here are five reasons why this shift matters now more than ever.

1. Litigation Exposed Just How Broken the Old System Was

One of the primary reasons I became involved with Scaled Comp is simple: I saw how broken—and inefficient—the old approach was.

When employers were sued, we often had to:

  • Manually review thousands of PDF timecards
  • Reconstruct meal and rest break data by hand
  • Calculate exposure using spreadsheets built from incomplete records
  • Or, in some cases, physically go through boxes of paper records and scan them just to create a usable digital file

This process was painfully slow, extraordinarily expensive, and created unnecessary risk. By the time data was analyzed, employers were already on their back foot—reacting instead of defending.

What struck me most was that this kind of analysis should not be reserved only for companies with massive IT teams and unlimited budgets. Every employer deserves access to tools that make compliance manageable and defensible.

2. AI Has Turned Employee Data Into a Strategic Asset

AI has fundamentally changed what is possible.

What once took teams of lawyers, paralegals, and weeks of manual work can now be done in hours. AI-driven platforms can:

  • Continuously analyze time entries
  • Identify compliance risks in real time
  • Generate clear, defensible reports
  • Highlight trends and outliers across locations or job roles

In 2026, employee data is no longer static. With AI, it becomes dynamic, actionable, and predictive—allowing employers to address problems before they become lawsuits.

This is not just about avoiding liability. It is about understanding how your business actually operates day to day.

3. Data Is the Key to the “Reasonable Efforts” Defense Under PAGA

The 2024 PAGA reforms changed the calculus for employers—but only if they can prove it.

Employers who can demonstrate reasonable efforts to comply with wage-and-hour laws may limit penalties to 15% of the total potential exposure. That defense does not come from good intentions; it comes from documented, ongoing data analysis.

Employers using software like Scaled Comp can show:

  • Continuous monitoring of compliance
  • Identification of risk areas
  • Corrective actions taken based on real data

In other words, AI-powered data analysis turns compliance from a one-time audit into an ongoing process—exactly what the law now rewards.

4. The Same Data That Protects You Legally Helps You Run a Better Business

Another major shift employers must recognize is that this data is not just for lawyers.

When properly analyzed, employee time data allows employers to:

  • Evaluate labor efficiency in real time
  • Improve scheduling decisions
  • Identify timecard fraud or ghost employees
  • Spot systemic issues tied to specific managers, locations, or shifts

AI makes it possible to move from hindsight to insight. Employers can use historical data to fix recurring problems and real-time data to prevent new ones from developing.

Compliance and efficiency are no longer separate conversations—they are driven by the same dataset.

5. Compliance Is Mandatory—But Value Comes From How You Use the Data

California law requires employers to maintain detailed time records.

The Wage Orders mandate records showing when employees begin and end work, meal periods, split shifts, and total daily hours worked. Labor Code section 1174 requires employers to keep records of hours worked and wages paid. And because wage-and-hour claims can reach back four years, employers must be able to produce accurate, readable records long after the fact.

The mistake employers make is stopping there.

In 2026, compliance is the floor—not the ceiling. The employers who succeed will be those who ensure their records are not only compliant, but usable, searchable, and defensible.

Final Thought

Employee data used to be a necessary burden. In 2026, it is a competitive advantage.

AI has made sophisticated analysis accessible to employers of all sizes. The question is no longer whether you can use your data—it is whether you are willing to continue treating it as a liability instead of the asset it has become.

That shift in mindset is exactly why tools like Scaled Comp exist—and why employers who embrace this approach will be far better protected, better informed, and better positioned for what comes next.